Thoughts on the CFPB Complaint Process; Should be a Happy Builder Conference this Year

Dec 19 2012, 7:36AM

In paying a short visit to Kansas, I learned that there are plenty of "oldest
trick in the book"'s from which to choose - but here is one that actually helps
community banks. The Outdoor Advertising Association of America reports more billboard
advertisements are used by local small businesses than large national ones and
represent 75% of total revenue. It turns out that about 80% of companies that
advertise this way have less than 50 employees, so clever community bankers, as
they drive around town, look closely at every billboard they pass and check the
name of the business advertising. Then, when they get back to the office, turn
in the names of those companies to relationship teams to try and generate new business.

A couple weeks ago the commentary mentioned the MBA/STRATMOR Peer
Group Survey and Roundtable Program. ("This program creates a forum for
participating mortgage banking companies to review their financial results and
operating practices in relation to their peers...detailed benchmarking outputs
by production channel...1.5-day roundtable meetings that allow companies to
network and share ideas and issues with peers.") I received a lot of
questions about the surveys and peer meetings, which are very good, but as a
reminder it is best to ask about participating by contacting Marina Walsh
in MBA's research and economics division, at mwalsh@mortgagebankers .org, or Jim
Cameron at STRATMOR Group at jim.cameron@stratmorgroup .com.

On to something a little less fun. Uh oh. I can't weigh in on the
validity of this comment, but it comes from a reliable wholesale rep and if
true is the first thing I've seen come out of an exam. "After our
recent CFPB visit they made us make changes...no more Flat Fee, required us
to have Borrower Paid and Lender paid at the same level...max Lender Paid at
3%, but at least they didn't tell us we had to only offer one comp plan.
Also coming is the inability to let Brokers fix their GFE's if there is a problem
with even one of the ancillary boxes, so after sitting in line for GFE review
the broker will have to start over. If the brokers don't see the writing on the
wall they never will."

Continuing with the CFPB thoughts, I received this note on the CFPB's
complaint process. "Imagine you owned a company and a group that
worked for you spent millions of dollars developing a free service to increase
customer goodwill. Now imagine if 1% of the customers that used the
service were so unhappy that they went to the trouble to file complaints.
What would you guess the satisfaction levels of the other 99% of users to be
and how much goodwill would you guess was being generated? This really
illustrates the problem of regulators believing they can create a perfect world
without having any experience of the difficulty of actually delivering a
service that people will pay for. I think the major regulatory issue for
the mortgage industry today is that the government has permeated every aspect
and corner of the business and that its involvement is hodge-podge and
uncoordinated. Even if all the separate agencies and regulators had
perfect intent and execution, they are uncoordinated and one agency often acts
to counter another agency's impact rather than something happening in the
market. Between the Fed, FIDC, FHFA, CFPB, OCC, FTC, FHA, etc., etc. - the federal government somehow needs
to get a grip on its overall impact on housing and finance. While I
don't think the federal government caused the financial crisis, it certainly
enabled it."

Congrats to Kevin Watters, who, besides having the honor of probably having to
spell out his last name as many times as I have, was just promoted by JPMorgan
Chase to be chief of its home loan business, relieving Co-Chief Operating
Officer Frank Bisignano of the temporary assignment to clean up the lender's
mortgage issues. Watters, 44, had been responsible since 2010 for originating
mortgages and now will also oversee mortgage servicing and problem loans and
hold the title CEO of Mortgage Banking.

Let's move on to some bank, investor, and vendor news. As always, it is
best to read the full bulletin for details, but these will give you an idea
about trends.

Kansas' CoreFirst Bank & Trust ($1.1B) will close three
branches in January after monitoring foot traffic for 5 years and finding these
branches had seen steep declines. (Let's not make any snap decisions!) Meanwhile,
Missouri's First Bank ($6.5 billion) indicates it will sell 8 of its 19 branches in Florida to Homebanc ($521mm, FL) for an undisclosed sum and
close 3 other branches, as it consolidates within the state and moves to save
costs.

Arvest
Bank ($13.9B, AR) said it will purchase 29 banking offices from Bank of
America for an undisclosed sum in AR, KS, MO and OK. The purchase adds $750mm in deposits and
650k new customers.

On the flip side, on Friday Community Bank of the Ozarks, Sunrise Beach,
Missouri, was closed and business transferred to the Bank of Sullivan,
Sullivan, Missouri.

In response to an increased number of borrowers retaining their previous
home while purchasing a new primary residence, US Bank has updated its
conventional policy to allow the current primary residence to be pending sale,
converted to an investment property, or converted to a second home.
Conventional borrowers will be subject to additional underwriting guidelines,
which require the existing full PITI housing payment, the proposed PITI housing
payment of the subject mortgage, and documentation for reserves equal to six
month PITI for both mortgages to be submitted as part of the underwriting
analysis. The relevant FHA guidelines are in effect for all FHA products,
for which borrowers will be need to submit the same additional information as
described above for conventional loans. This applied to all applications
taken on or after December 10th.

US Bank now allows borrowers to use long-term disability income to qualify for
loans provided that the income has been verified as deemed likely to continue
for at least three years from the date of the mortgage application. In
order to be eligible, borrowers receiving long-term disability will need to
submit the most recent two months' bank statements and either the policy or a
benefits statement in order for US Bank to determine their current eligibility,
the amount and frequency of the payments, and whether or not there is a
contractually established termination of modification date.

GMAC has updated its disaster policy for DU Refi Plus loans to require a
re-inspection after a Major Disaster Declaration has been issued by FEMA.
In cases where the inspection reveals that the property has been damaged, an
interior and exterior inspection will be required and any necessary repairs
will need to be completed before closing. Same Servicer DU Refi Plus
properties do not need to be re-inspected.

MSI has announced that it will not be applying the Fannie fees for
Property Inspection and Property Fieldwork Waivers. As such, sellers are
not permitted to charge borrowers any kind of "waiver fees" or disclose them on
the GFE or HUD-1. Any loans with previous underwriting conditions that
call for PIW or PFW fee disclosure will be cleared by MSI.

The MSI relock policy has been amended to allow a third relock in cases where
the maximum relock period is less than ten calendar days, the seller has
provided a valid closing date, and all parties agree to have pricing be worse
case based on the last relock price. Third relocks will also be subject
to a 0.375 fee in addition to worse case pricing.

Stonegate Mortgage has updated its FHA product guidelines and now
requires all loans with credit scores between 620 and 639 apart from 203(k) and
Streamline refinances to have received a DU Approve/Eligible or LP
Accept/Eligible in order to qualify. The FHA Streamline refinance
guidelines have also been revised to require a Verbal Verification of
Employment, a full credit report, and a mortgage pay history. Loans with
credit scores between 620 and 639 are now able to qualify provided that they
receive a DU Approve/Eligible or LP Accept Eligible. The new guidelines
are effective for all loans locked on or after December 3rd. Stonegate
is also levying additional fees on FHA Streamline refinances with FICO scores
under 680. All such transactions with FICO scores between 620 and 639 will be
subject to a 1.5% fee on top of the existing costs, while those with scores
between 640 and 659 will incur a 1% fee. An extra 0.50% will apply to
loans with scores between 660 and 679.

In response to recent high volume, Plaza Mortgage will be
increasing its appraisal fees. Consult the Plaza Lock Desk for more
information.

Franklin American has implemented new pricing adjusters for jumbo loans
in Florida, Nevada, Arizona, Michigan, and California. Consult the FAMC
matrix for full details.

Now is
a good time to be a builder, apparently. Forget about all that shadow inventory
or foreclosure noise - that is yesterday's news! The National Association of
Home Builders/Wells Fargo index of builder confidence increased to 47, the
highest since April 2006. "Builders across the country are reporting some of
the best sales conditions they've seen in more than five years, with more
serious buyers coming forward and a shrinking number of vacant and foreclosed
properties on the market," observed NAHB Chairman Barry Rutenberg, a home
builder from Gainesville, Fla. "However, one thing that is still holding back
potential home sales is the difficulty that many families are encountering in
getting qualified for a mortgage due to today's overly stringent lending standards."
(Editor's note: I know plenty of mortgage investors who are perfectly happy
with the current lending standards, and can't believe their volume numbers with
the current standards.)

Things are really slowing down heading into a week when they are going to
slow down even more. Folks may be at work, but productivity won't be setting
any records! As a prelude, Tuesday rates drifted higher and MBS prices worsened
(although not as much as Treasury prices) on slightly-higher-than-average
volume. Our risk-free 10-yr T-note sold off almost .625 in price and closed at
1.83% as investors remained less risk averse on perceptions of progress on the
fiscal cliff. MBS prices worsened about .250 in price.

Today we've had the MBA applications data, which confirms what lock desks
already knew. Apps dropped last week by almost 13%, with refi's tumbling 14%
and purchases dropping 5%. We also will see the Housing Starts and Building
Permits tandem for November. Housing Starts is projected to decline 2.3% while
Permits is expected to increase slightly. At 1PM the Treasury auctions $29
billion in 7-year notes which is the final coupon auction for 2012. In the
early going the 10-yr is slightly better at 1.81% but don't look for much improvement
in MBS or rate sheet prices this morning, and in fact may even be a little
worse depending on what the lender did about yesterday's sell off.

(A repeat, but it becoming a tradition.)
Three men died on Christmas Eve and were met by Saint Peter at the pearly
gates.
"In honor of this holy season" Saint Peter said, "You must each
possess something that symbolizes Christmas to get into heaven."
The Englishman fumbled through his pockets and pulled out a lighter. He flicked
it on. "It's a candle," he said.
"You may pass through the pearly gates", said Saint Peter.
The Scotsman reached into his pocket and pulled out a set of keys. He shook
them and said, "They're bells."
Saint Peter said, "You may pass through the pearly gates".
The Irishman started searching desperately through his pockets and finally
pulled out a pair of ladies' panties.
St. Peter looked at the man with a raised eyebrow and asked, "And just
what do those symbolize?"
The Irishman replied, "These are Carols."
And So The Christmas Season Begins......

About the Author

Rob Chrisman began his career in mortgage banking â€“ primarily capital markets - 27 years ago in 1985 with First California Mortgage, assisting in Secondary Marketing until 1988, when he joined Tuttle & Co., a leading mortgage pipeline risk management...
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